New GRI chief executive outlines the organisation’s struggle to maintain its dominance and the importance of credibility in accounting.
It’s nearly two decades since the Global Reporting Initiative (GRI) released its sustainability reporting guidelines. The guidelines attempt to quantify how a company affects its social and natural environment, and have become a dominant force in global sustainability reporting.
In 2015, according to a KPMG survey of corporate responsibility reporting in 45 countries, the GRI guidelines were the corporate responsibility reporting mechanism of choice for 60 per cent of reporting entities.
The KPMG figures did, however, also show a slight drop in GRI usage from 2013 to 2015, particularly among large companies.
Global reporting initiative at a turning point
GRI, a non-governmental organisation based in the Netherlands, is battling a number of forces in its fight to remain pre-eminent in sustainability reporting. The proliferation of approaches to sustainability (also called non-financial) reporting has diluted its market share and confused users.
There is also a widespread perception in the investment and wider community that sustainability reports are little more than a brand aid.
In 2014 the organisation acted to counter these trends by reframing its methodology as more akin to financial accounting.
It reformulated the guidelines into standards, releasing them at the end of 2016. It’s not just a name change. The rules about organising the data have changed, and so has the terminology, although the focus on describing a company’s impact on the world remains.
How do companies respond to sustainability reporting?
Any company that wants to continue to use the GRI approach must make a considerable investment in learning how to map the old guidelines onto the new standards by 2018.
New chief executive Tim Mohin, who arrived in January 2017, has landed at a critical juncture: just in time to bed down the makeover.
Like his predecessor Michael Meehan, Mohin comes from the US private sector. He is steeped in the culture and language of corporate sustainability reporting.
Before heading corporate responsibility divisions for Advanced Micro Devices, Apple and Intel, he worked at the US Environmental Protection Agency.
Why jump to a not-for-profit, especially at a time when the financial outlook for such outfits is hardly rosy?
“There’s a very clear reason I’m here, and that is to advance sustainable development. What I can tell you about is the power of global corporations, and about their global buying power. It can be a major force for good,” says Mohin.
Does sustainability reporting work?
There is a growing clamour, after decades of triple bottom line and sustainability reporting, for evidence that initiatives such as GRI’s have affected corporate practices.
“I think sustainability reporting has become a major labour that doesn’t necessarily translate into moving the needle in boardrooms,” says Mohin.
“Let me be clear – I firmly believe it has had results, but the proof is missing. We can’t track trends at the moment.”
Mohin says the data can have an impact as a forecasting tool, once managers have determined critical data points and started to report them to decision-makers.
He wants to see small to medium enterprises “where the bulk of economic activity is generated” adopt the practice.
“There’s real work that needs to be done.”
Will sustainability reporting work for accountants?
There is a sense that Mohin is raring to get his teeth into projects that will deliver greater credibility to GRI’s efforts.
First, he must sell the standards. He says the benefits of the standards include that they’re modular (each has the exact same terms of reference, making them more interchangeable than the guidelines), and they will make the materiality process more efficient, allowing companies to narrow their focus to the data points on which the company has the biggest impact.
Also – a key point – accountants like them.
“Standards are globally credible,” says Mohin. “Yes, we think this kind of language is appealing to corporate finance teams. We consider standards are more amenable to uptake.”
The GRI is betting on it. The reformulation was undertaken at some cost to the organisation, which went into deficit in 2015-2016 largely as a result of the endeavour.
The GRI does not charge companies that simply reference its approach, but there are for-fee programs for those wanting to engage with the methodology at a deeper level and gain GRI’s tick of approval for the layout of their reports.
Raising funds for sustainable reporting
In 2015-16 Australia was one of GRI’s largest government donors. The impact of foreign aid cuts is unclear.
GRI is working on new revenue streams as government funding shrinks, reaching out to corporate foundations and considering new lines of business.
One of those areas may well be assurance.
Discussions about the usefulness of sustainability reporting invariably end up butting against the problem of validation: how do readers know the numbers and processes behind sustainability reports are reliable?
“Assurance is a company-by-company decision. Many have not assured non-financial disclosures,” says Mohin.
He is exploring whether GRI can offer certification of assurers or reports.
“As you go down the path of developing standards, it’s an obvious question to ask,” he says.
Sustainable development and global reporting
There’s plenty more on Mohin’s plate.
GRI is working with the UN Global Compact to boost corporate reporting on the UN’s 17 sustainable development goals (SDG).
In 2018 GRI will release a tool that will help a company identify whether a particular GRI indicator can double as an SDG target and whether the company can therefore meet both sets of reporting in one GRI module.
Mohin is still feeling his way within GRI. A career working at the agonisingly slow frontline of corporate sustainability is likely to have given him staying power. In evolution, it’s the long view that matters.